YL v. FTYE

FCMP 122 / 2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 122 OF 2012

_______________

________________

__________________

DECISION ON COSTS

__________________

The Issue

1.  The mother is the applicant in the present proceedings.  Her application against the father under Section 10(2) of the Guardianship of Minors Ordinance, Cap. 13 (“the GMO”) for maintenance of their son, who was born out of wedlock, was settled about 2 weeks before the trial.  The only remaining question is one of costs.

The Background

2.  In this Decision, I will refer the applicant as “Y”, the respondent as “F” and the child as “YW”.  

3.  Y and F are now 37 and 46 years old respectively.  F is a Hong Kong resident and Y was a mainlander.  

4.  The parties started their relationship in about 1999 in Shenzhen, when F at that time was already married.  They cohabited in a rented apartment in Shenzhen and out of this relationship YW was born on 31 July, 2003.

5.  It appears that not long after the birth of YW, their relationship turned sour and F left “the family”.

6.  Y then married a Hong Kong resident in about August, 2007.  She and YW were granted permission to immigrate to Hong Kong in October, 2011.

7.  It appears that at the relevant times Y was not working and she is the only one who has been taking care of YW. According to Y, F paid her maintenance for a brief period of time only.  After F had left, YW was solely maintained by Y out of her own savings and after she got married, she and the son were being maintained by the husband.

8.  YW is now attending primary school and living with Y and her husband in Hong Kong; and is being regarded as a member of their family. 

9.  As for F, he is a designer and, as can been seen from his Form E which I will refer to in the later part of this Decision, apparently he has been doing quite well.  He has married for 16 years and has 2 daughters, aged 7 and 2 respectively.

10.  The trial of the application was scheduled to take place on 3 July, 2013.  Thanks for the good work of the mediator, the parties were able to arrive at an agreement regarding maintenance but they failed to come to an agreement on costs.  As has been clearly set out in the Settlement Agreement dated 20 June, 2013, both parties are contented to leave the costs issue of the present proceedings to be determined by the court.

11.  Mr Ko, for Y, asked for the costs of the proceedings to be paid by F, to be taxed on party and party basis. 

12.  Mr Chiu, for F, however, submitted that the proper costs order should be no order as to costs.

The Settlement Agreement

13.  According to the Settlement Agreement, the scheme for YW’s maintenance, on its board terms, is as follows,

(a) F is to pay $12,000 being the monthly maintenance for YW (including the accommodation fee, public utilities fee, meals (school meals), tuition fee, stationery and books, all travelling expenses, medical/dental expense, extra-curriculum activities, entertainment/gift, vacation, cloth/shoes, pocket fee, school uniform and glasses) with effect from June, 2013 until YW reaches 18 year old or finishes full-time education whichever is the later.

(b) F is to establish an education/insurance fund in the sum of $304,632 for YW’s university or tertiary education in Hong Kong and is required to pay the instalments/premium of the education/insurance until it is fully paid-up.  F is entitled to use the moneys under the said education/insurance fund for payment of tuition fees.  If the fund is insufficient for the purpose, F is to pay the shortfall.  However, if YW fails to gain any admission, the fund will be reverted to F. 

(c) F is to take out a medical insurance in the sum of $500,000 for YW’s protection. 

14.  Further, both parties agree to review the monthly maintenance when YW proceeds to secondary school education.  Both parties agree to resolve their differences through mediation, if necessary. 

The Legal Principles

15.  Since both parties’ legal representatives are apparently unaware of the applicable legal principles, I drew their attention to a recent judgment by Hon Madam Au-Yeung in Famous Marvel Company Limited & Ors v. Conversant Group Limited & Ors, HCA 2153/2009 (date of judgment:  29 October, 2012) in which the learned judge set out the principles for determining costs,

“22.  There is no dispute that even if a case is settled except as to costs, the Court still has power to determine which party should be liable for costs.  There is no tradition for there to be “no order as to costs” in such a scenario.  I am guided by the following principles in deciding costs:

(i) The Court is to decide if the party seeking costs has substantially obtained the reliefs sought in the litigation: Re Chinese United Establishment Ltd, HCCW 291/1994, 5 October 1995, Rogers J (as he then was), approved in CACV 214/1995; Lai Yuet Chun v Super Deluxe International Limited & ors, HCCW 186/2001, 3 June 2003 Kwan J (as she then was).

(ii) At each end of the spectrum there will be cases where it is obvious which side would have won had the substantive issues been fought to a conclusion.  In between, the position will, in differing degrees, be less clear.  How far the Court will be prepared to look into the previously unresolved substantive issues will depend on the circumstances of the particular case, not least the amount of costs at stake and the conduct of the parties.  Brawley v Marcynski (No.1) [2003] 1 WLR 813.

(iii) The Court will first consider if it is in a position to say what the likely outcome after trial would have been.  If it is not in a position to do so, the order may well be no order as to costs: Brawley v Marcynski (No.1),at para 18, Longmore LJ; followed in BCT Software Solutions Ltd v C Brewer & Sons Ltd [2004] FSR 150.

(iv) The Court may permit parties to adduce evidence on the question of costs: Ta Tung China & Arts Ltd v Fontana Restaurant Ltd [1999] 1 HKLRD 404; Lai Yuet Chun v Super Deluxe International Limited & ors, at para 12.  However, to say that the parties must go to trial in order to resolve any outstanding questions of costs would be contrary to the underlying objectives enshrined in RHC Order 1A rules 1 and 2: Graham M Morley v Kwan Wo Wan & others, HCA 4366/2003, 30 December 2009, Recorder Jat SC.

(v) A broad brush can be taken by referring to all matters already laid before the Court, eg pleadings, correspondence, witness statements, transcripts of evidence and the terms of the settlement order: c.f. BCT Software Solutions Ltd v C Brewer & Sons Ltd, at para 9; Graham M Morley v Kwan Wo Wan & others.

(vi) The objective is to do justice between the parties without incurring unnecessary Court time and consequently additional cost: Brawley v Marcynski (No.1).”

16.  In the present case, the parties have chosen to proceed on the basis of the evidence already lodged and no viva voce evidence was called.  

Has Y substantially obtained the benefits sought?

17.  Mr Ko submitted that Y has substantially obtained the reliefs sought. He argued that she has successfully asked for financial provisions to be provided and F has never been able to beat this claim. 

18.  As for F, Mr Chiu’s arguments are two-folded. First, Y has not substantially obtained the reliefs sought.  He argued that since Y never gave any open proposal, hence no one knew exactly what she was asking for.  There is therefore no basis for her to say she has succeeded.   In the event that the court is against him on this point, Mr. Chiu submitted that because of the unreasonable conduct and the unnecessary steps taken by Y in the proceedings, she should be deprived of her costs.

19.  Although the parentage of YW was once disputed in the nascent stage of the proceedings, this issue was quickly resolved by the positive confirmation of the DNA test.  F then conceded to pay maintenance for YW.  On that basis, since “liability” has been admitted, it should be clear to everyone that the likely outcome would be an award of maintenance or to devise a scheme of maintenance for the benefit of YW.

20.  In the present case, I am able to come to the conclusion that Y has substantially obtained the reliefs sought. 

21.  In her Originating Summons, she asked for monthly maintenance or a lump sum to be paid by F and other directions as the court thinks appropriate.  In her supporting affirmation, she set out YW’s monthly expenses which are in the region of $3,711.  These do not include YW’s share of costs of accommodation and general household expenses such as food consumed at home.   As a matter of fact, according to her Form E, her personal and general expenses together with YW’s expenses are stated to be in the region of $11,552 only.   When these figures are compared with the final figure of $12,000 per month, bearing in mind that this $12,000 covers the period of YW’s primary education only, it seems to me clear that this $12,000 has already included YW’s need for accommodation and his share of general expenses and has also factored in the far better living standard enjoyed by F, as can be inferred from the fact of substantial wealth he owns.   I have also not lost sight of the fact that there are also two funds in the respective sums of $304,632 and $500,000 for the benefit of the child.

22.  As a matter of fact, Mr Chiu also admitted, in his skeleton submissions, that the settlement reached by the parties is sufficient to cater for YW’s living and accommodation needs and future education expenses and is sensible and satisfactory for the welfare of YW.  During the hearing, I specifically asked Mr Chiu what other reliefs F has not obtained out of the settlement and he was not able to give me an answer.

23.  Thus analysed, I have no doubt that Y has substantially obtained the reliefs sought.

Y’s Unreasonable Conducts

24.  Mr Chiu mounted 3 challenges.

25.  The first is that there was no pre-action letter.  The first document F received was the Originating Summons.

26.  The second is that Y, as the custodial mother, should fully realize the needs of YW.  She should be in a position to formulate a welfare plan by way of an open proposal for F’s consideration. However, despite repeated requests by F’s solicitors, Y failed to give any proposal.

27.  The third is that Y had taken the trouble of preparing a lengthy Questionnaire and a Schedule of Requested Documents but later abandoned them.

28.  Mr Chu said all these have unnecessarily prolonged the proceedings and substantial costs were wasted.  He relied on O. 62, r. 5 RDC which provides that, the court in exercising its discretion as to costs shall to such extent, if any, as may be appropriate in the circumstances, take into account the underlying objectives set out in Order 1A, rule 1 (O. 62, r. 5 (1)(aa), RDC) and the conduct of all the parties (O. 62, r. 5 (1)(e), RDC).

No Pre-action Letter

29.  In my view, although it may be more prudent to have a pre-action letter issued, its absence, however, is not fatal to Y’s claim for costs.  First, there is so far no pre-action protocol for cases of this nature. Secondly, as Mr Ko has pointed out, both parties in their affirmations have confirmed that Y had contacted F in the end of 2011 asking for maintenance but without success.  As I have already mentioned, F initially disputed his parentage to YW and demanded a DNA test.  Given all these and together with the fact that F did not pay any maintenance for more than 8 years, I do not think it makes any difference even if a pre-action letter has been issued.  I am not convinced that the parties were able to settle the matter without having taken out the present proceedings.

No Proposal from Y

30.  Mr Chiu submitted that given his substantial means as disclosed in his Form E, F should be able to meet any reasonable needs of YW.  However, Y all along failed to provide details regarding YW’s education plan, accommodation needs and his living expenses or give any proposal for F’s consideration.

31.  It is not in dispute that F, through his solicitors, did repeatedly ask Y for proposals.  Mr Ko admitted that it was not until 23 April, 2013 that Y, by way of a without prejudice letter, asked for a lump sum of $600,000 and periodical payment in the sum of $5,000 per month until YW attains the age of 18 or finishes full-time education. 

32.  On the other hand, prior to this and on the same day, by way of a letter by his solicitors, F offered, on a without prejudice basis, a lump sum of $150,000 plus periodical payment of $5,000 per month, or alternatively, a lump sum of $350,000 as full settlement of Y’s claim for maintenance and Y should abandon her claim for periodical payment.  Before this, F’s proposal only stood at $5,000 per month.

33.  Mr Ko submitted that apart from the reasonable needs of the child, it is also material to know the financial means of the parent.  He submitted that the only test set out in Section 10(2) of the GMO appears to be what the court thinks is reasonable having regard to the means of the parent against whom an order is sought and he relied on J v. C (Child: Financial Provision) [1998] 3 FLR 79 where Hale J said at 87 that “the child is entitled to be brought up in circumstances which bear some sort of relationship with the father’s current resources and the father’s present standard of living”.  

34.  Mr Ko submitted that for this reason he needed to know F’s financial position but since F failed to fully disclose his financial means and standard of living, Y was simply not in a position to make a proposal.  Mr Ko stressed that even on 23 April, 2013 when Y made the without prejudice offer, F’s financial situation still remained unclear.  Indeed, it is Y’s case that up to now F still has not disclosed the true picture of his financial means.

35.  In his Form E, F stated he has net assets in the region of $13.25 million.  This is the figure he gave without any concrete valuation evidence in support of the alleged values of his landed properties and apparently this does not include the values of the companies he owns.  

36.  He also stated in his Form E that he owes one TI Limited $6,228,000.  On the evidence before me, it seems to me clear that F’s relationship with this company and the genuineness of his liabilities towards this company need further clarification.  

37.  Further, F has not disclosed the living expenses of his two daughters.  Clearly, Y should be entitled to know the living standard of YW’s half-sisters.

38.  Mr Ko has taken me to the Questionnaire and the Schedule of Requested Documents filed on 11 December, 2012.  I am satisfied that they are clearly targeting at F’s financial means and his and his daughters’ living standard.  I am of the view that, taking a broad brush approach, the queries raised by Y are justified.

39.  The correspondences exchanged between the parties show that Y had asked F for proposal which specifically addressed the issues of YW’s accommodation need, provision for tertiary education and carer’s compensation and F had asked Y for details of reasonable maintenance but there was no reply from the other side.

40.  I consider that probably out of caution, Y was not willing to give a proposal lightly in the absence of the full picture of F’s financial situation.  In this connection, Mr Chiu conceded during the hearing that it was reasonable for Y to have waited for the clarification of Y’s financial position but the picture should have been cleared after Y had filed his Form E. 

41.  It is true that during the mention hearings, I did urge Mr Ko to provide a proposal for F’s consideration.  I also gave a direction on 18 April, 2013 that the parties had to lodge and serve their open offers on or before 13 June, 2013, some 3 weeks before the trial. If Y had the time to consider and give an open offer until 13 June, 2013, I do not think she should be deprived of the costs for not having given a proposal before the deadline.

42.  As I have already referred to above, I am of the view that F’s Form E did require further clarification.  For the above reasons, I do not think Y has committed the unreasonable conduct complained of.

Wasted Costs from Questionnaire and Schedule of Requested Documents

43.  I would not repeat what I have said above regarding the Questionnaire and the Schedule of Requested Documents.

44.  I have checked the records of the mention hearing of 17 January, 2013.  The records show that in order for the case to proceed to trial as soon as possible, of all the questions and requests raised, the parties agreed during the hearing that F would only be required to provide the particulars on his daughters’ living expenses.

45.  I note Mr Chiu did not say that the documents are unnecessary.  His complaint is that Y has abandoned them.  In my view, if these documents are relevant in seeking clarification on F’s financial position, their costs cannot be said to have wasted simply because Y, for one reason or another, has not insisted on obtaining all the answers from F before trial.  In any event, F would be able to know beforehand the lines of questions that he would be facing in trial.

Conclusion

46.  For the above reasons, the grounds raised by F are rejected.  It follows that I should award costs in favour of Y. 

47.  I order that the costs of the proceedings, including all costs reserved, be borne by the respondent, to be taxed if not agreed.  The applicant’s own costs to be taxed in accordance with the Legal Aid Regulations.

Representation